An extremist, not a fanatic

September 30, 2015

Researchers at Microsoft first looked at professional pundits' predictions for the NBA playoffs - which are best-of-seven matches - conditional upon seeing the results of previous games in the series. They found that the professionals' forecasts were more internally consistent than amateurs' forecasts, suggesting that the experts are more rational than the amateurs. However, when the pundits were then asked analogous questions about the probability of seeing red and black balls drawn from an urn, this superior internal consistency disappeared. They conclude:

Expertise fades in the lab even when the lab explicitly mimics the field.

This is consistent with some earlier research (pdf) by Steve Levitt and colleagues, who have found that professional poker players' ability to use minimax strategies deserts them when they are asked to play abstract games in the lab.

This corroborates the claim made by Dan Davies in a classic post: there is no such thing as a general purpose expert. As Richard Feynman said, "a scientist looking at nonscientific problems is just as dumb as the next guy.”

Instead, as George Loewenstein has said (pdf), "all forms of thinking and problem solving are context-dependent." When they are taken out of their context, experts lose their expertise.

Richard Dawkins is the poster-boy for this. He's a brilliant popular scientist, but can be a prat in other contexts. But of course he is not alone. Think of Niall Ferguson or James Watson or Tim Hunt or Steve Levitt, or many businessmen in politics. Peter Spence's advice seems, therefore, reasonable:

It'd be great if we all treated the opinions of Nobel prize winners outside of their field of expertise as basically irrelevant.

For me, there's something sad here. It seems that the scientific approach - such as the question "what counts as evidence here?" - is hard to apply outside of one's own field. In this sense, perhaps science and religion are closer than Professor Dawkins would like to think: just as many Christians forget their Christian principles when they are outside the church, so scientists forget their scientific principles when they are outside the lab.

September 29, 2015

Janan Ganesh interprets the rise of Corbyn as a sign of Britain's prosperity - that people "can afford to treat politics as a source of gaiety and affirmation":

A Corbyn rally is not a band of desperate workers fighting to improve their circumstances, it is a communion of comfortable people working their way up Maslow’s hierarchy of needs.

I fear this misses two points.

One is that twas ever thus. Left-wing movements have always contained - and often been led by - the well-off. Lenin, Trotsky, Mao and Castro were all nice middle-class boys. Several of the leaders of the 1945-51 Labour government went to public school such as Attlee, Dalton and Cripps. And the soixante-huitards were the products of the long post-war boom. Left-wing politics has always contained a lot of Howard Kirk types.

One reason for this is that the moderately well-off feel a greater sense of grievance at inequality. It is people on £40-50,000 a year who are excluded from the London housing market by gentrification. And, being sociologically indistinguishable from them, they are more apt to envy (perhaps wrongly) the 1%; it is the classmate who's done slightly better for himself that we envy more than the Queen.

By contrast, the really poor tend to be politically inactive. This might, as Janan says, be because they are lower down the hierarchy of needs and are too busy trying to make ends meet to attend rallies. But it might also be because they have adapted to their poverty and lack the sense of entitlement that motivates the better off to political activity (on either side).

Which brings to be another point that Janan omits. Not everyone is so comfortable. The IFS said recently:

The incomes of the non-pensioner population remain considerably behind where they were before the recession: in 2013-14 the median income of non-pensioners remained 2.7% below its level in 2007-08...Rates of income poverty among working families have been rising.

You might object that such people are still well-off by most historic standards. But this omits the fact that, for many poor working families, incomes will fall a lot next year when tax credits are cut. And it also overlooks the fact that cruel and irrational benefitsanctions (pdf) and the bedroom tax are driving people to poverty, despair and evensuicide: Kate Belgrave is essential reading on this.

In this sense, I fear that, like most political journalists in the Westminster Bubble, Janan is underplaying the fact that many people are not at all comfortable. This discomfort is both important and ameliorable. Yes, Janan is right to say that many Corbynistas are well-off middle-class types. But even so, there are real grievances and hardships out there. And Corbyn, despite his many faults, recognises this.

September 28, 2015

There's a point I made in my previous post that I'd like to emphasise. It's that voters support austerity for the same, sometimes mistaken, reason that they support price controls - because they under-estimate the extent to which emergent processes sometimes produce benign outcomes.

What I mean is that what free marketeers say about the price system - that it is the benign outcome of uncoordinated individual decisions - is also true of government borrowing now.

This borrowing is the counterpart and effect of decisions by millions of companies and households (pdf) around the world to save and not invest*. Given that much of the rest of the world wants to be net savers, somebody must be a net borrower - and that somebody includes the UK government.

This borrowing is as John says a solution not a problem - because it is helping to sustain demand.

At this point I could write thousands of words about MMT. But why bother? Just look at real bond yields. These tell us that financial markets are untroubled by government borrowing - because the same net savings which cause this borrowing also cause low interest rates.

In this sense, the division of opinion is not between left and right but between economists and non-economists. Most economists are more or less relaxed about the deficit for the same reason that they often support freeish markets - because they appreciate that individuals' uncoordinated decisions sometimes have tolerable outcomes. Non-economists, being less aware of this, are keener for the government to "control its borrowing" just as they want state control over other aspects of the economy.

All that said, there are two massive caveats here.

First, I am NOT saying that deficits are always benign any more than I am saying that other emergent processes are. Whether either is the case or not varies from time to time depending upon the circumstances**. I can imagine - and have seen - circumstances where big government borrowing is a problem. It's just that those circumstances are not here not now.

Secondly, some of the reasons for high net private savings around the world are assuredly not benign: weak welfare states, a lack of consumer confidence and secular stagnation. In a better world, the government would be borrowing less. But inferring from this that the government should cut borrowing is like withdrawing medicine from a sick man because he wouldn't need it if he were healthy.

Which brings me to a problem. It's possible that many of the causes of global net savings - and we can to them ageing populations in Europe - are longlasting. To the extent that they are, government borrowing might persist. If so, the Fiscal Charter's promise to achieve a surplus on PSNB by 2019-20 might require yet more counter-productive fiscal tightening. Deficit reduction should be state-dependent, not time-dependent.

I appreciate that there political reasons why Labour might support the Fiscal Charter, but I'm not so sure there are good economic ones.

* I stress around the world: the counterpart to government borrowing is now an overseas deficit - which is to say net savings by the rest of the world.

** Note here that, yet again, the bigotry of anti-Marxists is 100% wrong. It is me the Marxist who is stressing that context is everything whilst anti-Marxists of right and left want to see lawlike generalizations where none are appropriate.

Paradox one is that, as John says, "left-wing" policies are popular but left-wing parties are not.

One reason for this, at least in May's general election, is that as Jon Cruddas has said the voters disliked Labour's opposition to austerity.

There is, though, no contradiction between voters being "left-wing" on nationalization and price controls but "right-wing" on austerity.

The key word here is "control". People support nationalization and price controls for the same reason they support immigration controls; they want to feel that the government is in control. They under-estimate the extent to which spontaneous order or emergent processes produce benign outcomes without state direction*. The invisible hand is well-named: people can't see it.

I suspect that support for austerity arises from this same urge for control. People want to believe that the government is in control of its finances. They don't like the idea that government borrowing is the uncontrolled (and often benign) outcome of private sector choices to save or borrow.

Which brings me to a second paradox. Although voters want the government to expand its sphere of control, they don't want to expand their own control. There is pitifully little demand at the political level for greater worker control of firms.

I say this is a paradox because of a simple principle: control should be exercised by those who know the most and who have the most skin in the game. Many workers - those with job-specific human capital - have a lot to lose if their firm is badly managed and have the dispersed fragmentary knowledge to improve management. But the same isn't true for politicians: for example, George Osborne doesn't know better than the market or Low Pay Commission what is the right level for the minimum wage, and it's no great loss to him if he gets it wrong. We'd therefore expect to see more political demand for worker control than state control. But we don't. Which brings me to...

Paradox three. Although there's no political demand for worker control, many people vote for it with their own feet. Since current records began in 1984 the numbers of self-employed have risen by 67.5% to over 4.5m - an increase from 11.1% to 14.5% of all those in work.

Rick is of course right to point out that many of these are making little money in inefficient and doomed businesses, and many have been compelled into self-employment by a lack of decent alternative. But I suspect that people are also choosing self-employment even if it is insecure and badly paid because they want more control over their lives - or at least the feeling of control - than they can get from hierarchical employment. Research by Bruno Frey and colleagues has found that the self-employed are "substantially more satisfied with their work than employed persons" in many countries because they value autonomy in itself.

All this has an important implication. The phrases "left" and "right" are horribly misleading. The issue is: are uncontrolled emergent processes benevolent or not? Very many voters think not - which explains the otherwise paradoxical fact that they support "left-wing" price controls and "right-wing" austerity.

This in turn poses big political questions: how can we ensure that emergent processes are only reined in when they are harmful? Can we persuade voters of the virtues of spontaneous order without sounding like capitalist shills? Are there efficient means of satisfying the demand for control? These questions, rather than waffle about left and right, deserve more attention.

September 23, 2015

Recent allegations have reminded us that some initiation ceremonies can be a little unusual. I'd be failing in my duty if I did not point out some economic aspects of this.

Such rituals are common: we see them among army recruits, football teams, primitive tribes and university students. This very ubiquity suggests that they serve a useful purpose. This has been well described by Robert Cialdini in Influence. He points out that we have a strong urge for consistency. We will therefore rationalize a humiliating initiation ceremony by persuading ourselves that the high cost of joining a society means that membership thereof being very valuable.

This was established experimentally by Elliot Aronson and Judson Mills way back in 1958. They got female students to join a discussion group, with some of them having to experience the embarrassment of reading out swear words before doing so. They found (pdf) that the embarrassed subjects valued membership of the group more highly than those who weren't embarrassed. They concluded:

Subjects who underwent a severe initiation perceived the group as being significantly more attractive than did those who underwent a mild initiation or no initiation.

Initiation rites thus act as a bonding device, making people more loyal to their fellows: Lawrence Richards is right, therefore, even though he misdescribes the mechanism through which this happens.

This is very similar to the endowment effect - our tendency to value something merely because we have sacrificed effort or money to get it. Dan Ariely calls this the Ikea effect: having suffered the eighth circle of hell in going to Ikea and then the pain of assembling their furniture, you will value it all the more. He writes:

The more work you put into something, the more ownership you begin to feel for it...On the basis of price alone, it is easy to imagine that a $4000 couch will be more comfortable than a $400 couch. (Predictably Irrational, p135,180)

The classic demonstration of this, for which Ariely won an Ig Nobel prize, was the finding that expensive placebos work better (pdf) than cheap ones.

All this has some important and general implications. Here are three:

1. Where customers are ill-informed, sellers might overcharge for products in the hope that naive buyers will interpret a high price as a sign of quality. This (as well as the fact that people are forced buyers) might help explain the huge price of textbooks and academic journals. It also explains why financial advice is expensive even though some of it is worse than useless whilst a lot of good advice can be found freely and quickly; advisors use a high price to signal quality to phools.

2. Some markets can quickly become illiquid. One reason why houses are so slow to change hands when the market weakens is that home-owners are prone to the endowment effect and so value their house far more highly than potential sellers do. As Will Goetzmann has shown, this can mean that house price indices which only measure the prices of houses that actually sell can over-estimate prices in bad times and so under-estimate the risk of home ownership.

3. We can throw good money after bad. The endowment effect and our desire for consistency can give rise to the sunk cost fallacy - our tendency to stick with a bad idea just because we've spent time and effort upon it. This is sometimes called the Concorde fallacy, because the French and British governments continued to invest in Concorde even though the project looked a poor one. It might also explain why people remain in religions, political parties and indifferent relationships - because they have invested time and effort in them.

Perhaps, therefore, piggate illuminates a much wider range of behaviour than those who are laughing at Mr Cameron would like to admit.

September 22, 2015

There's at least one aspect of Corbynomics which many mainstream economists accept - the case for a National Investment Bank. Even critics such as John Van Reenen and the Economist see no objection to it. Indeed, Corbyn is simply adopting an idea proposed by, among others, the LSE Growth Commission (pdf) and Robert Skidelsky.

However, I fear that this is yet another example of something that is good economics but bad politics.

To see my point, remember that the Corbyn's NIB will invest not just in infrastructure but also in "the hi-tech and innovative industries of the future."

This is good economics, because it's likely that the market under-supplies investment in innovation. As William Nordhaus famously pointed out, the social returns to innovation far exceed the private returns to producers. Innovation thus has a positive externality. This means private firms will under-invest in it and so there is a case for state intervention. As Mariana Mazzucato has shown, state investments in technology can have positive spillovers to the private sector.

A big reason why the private returns to innovation are low is that it is a very risky business. Many apparently attractive projects will turn out to be expensive dead-ends but it is pretty much impossible to spot these in advance. William Goldman's famous saying of the movie business - "nobody knows anything" - applies generally. Two big facts tell us this. One is that the performance of venture capital trusts has been massively variable, with some losing fortunes. The other is that the Aim index - home to some innovative firms as well as a lot of dross - has consistently under-performed for years, which suggests that a lot of apparently promising innovations have failed.

I suspect that one reason for low corporate investment now is that firms have wised up to the fact that innovation doesn't pay.

There is, therefore a sound economic case for a NIB.

However, the same things that stop the private sector innovating mean that a NIB is bad politics.

If the NIB does its job properly it will back a lot of failures. This isn't because the state is bad at backing winners but because pretty much everyone is. Even the best private equity investors back a lot of duds: Marc Andreesen has estimated that 15 of 200 tech startups a year generate around 95% of the total returns. That leaves a lot that lose money.

And here's my problem. Our biased press will focus upon the latter. "Corbyn's bank costs taxpayers" millions would be a regular story. This could be exacerbated by the fact that the planning fallacy will ensure that even "safer" infrastructure projects will often run over time and budget. Even if the NIB is profitable on average - which perhaps it shouldn't be, given that it should be investing in projects with a high social return rather than private return - the media will present it as a failure.

Cynics might see in this a case for "people's quantitative easing". Picture the scene. Corbyn is being interviewed by some right-wing twat:

RWT: [Lists failed investments]. Your bank has cost the tax-payer millions.Corbyn: It's not the tax-payers' money. We created the money out of thin air!

This exchange, though, merely reinforces my point - that good economics is bad politics. The NIB is therefore like immigration policy and tax policy and fiscal policy...

For this reason, I welcome Corbyn's refusal to kowtow to the media. It is only by refusing to play their silly games that we have any hope of a rational economic policy.

September 21, 2015

Diego Costa has something in common with George Osborne. I don't just mean the obvious. I mean that both could be beneficiaries of a common cognitive error - the outcome bias.

Some observers are praising Costa for engineering Gabriel's sending off. "There is barely a team on the planet who would not benefit from Costa's streetfighting approach" says Oliver Kay in the Times. "He deliberately and skilfully got an opponent sent off" says Barney Ronay in the Guardian. "This was wasn’t a mugging. It was a heist, and an expert one." And Arry Redknapp adds that "you would like to have him in your team."

However, if the game had been reffed properly, Costa would have been red-carded and so Gabriel, having nobody to kick, would have stayed on the pitch. That might have cost Chelsea the game. We would not then be hearing praise for Costa, nor talk from Mourinho about emotional control.

In this sense, what we're seeing is the outcome bias. Costa's behaviour looks good not because it was skilful but because he had the good luck of having Mike Dean as ref. As Daniel Kahneman has written:

Hindsight bias has pernicious effects on the evaluations of decision-makers. It leads observers to assess the quality of a decision not by whether the process was sound but by whether its outcome was good or bad. (Thinking Fast and Slow, p203).

The outcome bias, he says, can "bring undeserved rewards to irresponsible risk seekers." Maybe Costa was one of these: he recklessly risked getting sent off himself.

This bias is a common one. It's common to praise bosses of successful companies, without asking whether that success was because of the CEO's decisions or just luck:Alex Coad's finding that corporate growth is largely random, and Ormerod and Rosewell's claim that bosses can't predict the effects of corporate strategy both suggest that we understate the latter. Here's Kahneman again:

Because luck plays a large role, the quality of leadership and management practices cannot be inferred reliably from observations of success.

A similar thing might happen in medicine: doctors get excessive praise for lucky but correct diagnoses and too much blame for reasonable but wrong ones.

Which brings me to Osborne. Some of his supporters regard the decent growth we've had had since 2013 as evidence that austerity worked. This too, is an example of the outcome bias - interpreting a bad decision as a good one simply because it eventually led to a happier outcome. But as Simon says, this is absurd:

Imagine that a government on a whim decided to close down half the economy for a year. That would be a crazy thing to do, and with only half as much produced, everyone would be much poorer. However, a year later when that half of the economy started up again, economic growth would be around 100 per cent. The government could claim that this miraculous recovery vindicated its decision to close half the economy down the previous year. That would be absurd, but it is a pretty good analogy to claiming that the recovery of 2013 vindicated the austerity of 2010.

There is, though, a problem here. The outcome bias isn't wholly stupid; as I've said, cognitive biases persist because they have a grain of usefulness. In an uncertain world, it's impossible to foresee the effects of choices and so it's hard to judge the quality of a decision at the time - especially if we don't know the decision-maker's information set. A good outcome might then alert us to the possibility that there was more wisdom in the decision than we thought at the time. I don't think this applies to Osborne's austerity - mainstream economics told us at the time that it was a bad choice - but it might apply to Costa. Maybe he judged that Mike Dean would not take a big decision to favour Arsenal and so thought he could get away with his behaviour. If so, praise for him is warranted. Sometimes, it's hard to distinguish between rational and lucky behaviour.

September 19, 2015

There's been much debate and, I fear, confusion, about "people's quantitative easing". Personally, I suspect the case for it all depends on the circumstances.

Let's start from a fact - that if it has any effect at all, PQE is inflationary. Whether this is a good thing or not depends upon the conditions in which it is introduced.

If PQE is undertaken when inflation and economic activity are high, then Tony is right - it would be incompatible with the Bank's mandate to keep inflation at 2%. If, however, we face the risk of deflation and/or weak activity then PQE would be entirely consistent with that mandate. In such circumstances, there is nothing radical whatsoever in the Bank buying the bonds of a National Investment Bank: the Fed's QE involved buying the bonds of government agencies such as Fannie Mae and Freddie Mac, so why shouldn't the Bank do the same?

Doing this would not require any breach of Bank independence. Any expansion of QE would require authorization by the Treasury, and as part of this the Treasury could authorize the Bank to buy NIB bonds.

Undertaken in the appropriate conditions, therefore, there is nothing radical or unusual about PQE*.

In fact, it could be that the problem with PQE is that - if undertaken at a time of recession - it would not be radical enough. I say so for three reasons:

1. The QE element might not be very stimulative. Let's say, for concreteness, that the government announces £50bn of investment via the NIB. This would represent an increase in aggregate demand of around 3%. This itself would tend to be inflationary: how much so depends upon how much spare capacity there will be. If this is financed by the Bank buying NIB bonds there might be an additional boost to inflation through the same mechanisms that orthodox QE added to inflation: by raising inflation expectations;by boosting asset prices as investors who get the cash reinvest it; and perhaps by weakening sterling. These mechanisms, though, might be weak. The Bank estimates (pdf) that the first £200bn of conventional QE raised inflation by 0.75-1.5%, so £50bn of QE might have a quarter of that impact. That's 0.2-0.4%, which isn't much.

2. PQE concedes too much to deficit financing. In saying that NIB bonds should be bought by the Bank, PQE fails to address the fact that there is massive demand for safeish assets and so a NIB can be financed at negative real rates through ordinary bond issuance.

3.There are more radical fiscal/monetary alternatives. The Bank could simply write everyone a cheque. It could, as Andrew McNally has argued, print money to allow households to buy shares. Or a mix of QE and conventional bond finance could be used to finance the creation of a sovereign wealth fund whose dividends would eventually form part of a citizens' basic income. Relative to these ideas, PQE - if introduced when monetary/fiscal stimulus is necessary - is a remarkably conservative idea.

Which poses the question: why do its advocates give us the opposite impression? One reason is that some seem to have been confused about when it would be introduced: would it be implemented in normal times or reserved for when inflation has to be raised?

Another reason is that some of them have conflated the case for PQE with attacks upon mainstream economics and, often, arguments for modern monetary theory**. These, though, are separate matters. PQE, under the right circumstances, would be a mainstream conservative policy.

* There is another issue here. One could argue that the 2% inflation target is too restrictive and that it should be lifted to, say, 4%. This would create more room for PQE. But this too is not a radical idea: it was suggested by Andy Haldane yesterday.

** It seems to me that MMT is mostly a wholly reasonable idea, undermined by the dogmatism, obscurantism and longwindedness of its advocates.

September 16, 2015

One of the problems with the English language is that words such as "mistake" and "error" connote shortfalls from a feasible ideal when in fact, in some important cases, errors are inevitable and unavoidable.

I'm prompted to say this by Yian Mui's piece which points out that "the Fed has continually underestimated how much support the economy needs" in the last seven years. A similar thing is true in the UK. For example, the Bank of England forecast two years ago that inflation would now be around 2% but in fact even the core rate is just 1%.

These "errors", though, are not corrigible. Macroeconomic forecasts are inevitably subject to a margin of "error". And this margin is especially big just when we need forecasts most, to warn us of recession; as Prakash Loungani pointed out in 2000 economists have a perfect record of failing to foresee recessions, a fact corroborated by subsequent experience. These "errors" aren't due merely or even mainly to economists' incompetence but to the fact that the economy is a complex process whose outcomes depend upon inherently unpredictable network effects. As GLS Shackle said years ago, accurate forecasting is pretty much impossible*.

This in turn means that monetary policy "errors" are common and inevitable, simply because policy affects the real economy and inflation with a lag - remember the title of Tony Yates' blog - and so the right policy now requires foresight as to future economic conditions.

In the absence of such foresight, though, policy will often be "wrong". The recession of 2009 implies that policy was too tight in 2007-08 and the fact that inflation now is well below its (symmetric, remember) target implies that policy was too tight some months ago.

These "errors", though, are not eliminable bugs but features; forecast-based policies will often be wrong.

It's for this reason that, like Tony, I am lukewarm about money GDP targets: I can't get excited about whether it's better for the Bank to miss a money GDP target than an inflation target.

Instead, in thinking about monetary policy we must give great weight to the inevitability that policy will be wrong.

This has, of course, long been a feature of the literature. Back in the 1960s, William Brainard said (pdf) that it meant that central banks should (pdf) be slow to change rates - a principle which the Fed followed for years. And textbooks say that central banks should (pdf) minimize a loss function. The precise form of this function is, though, debatable. Simon says that at low inflation, the Bank should put more weight upon output losses than inflation overshoots, but JP Koning says this isn't necessarily true if interest rates can become negative.

One reason why is that the gilt market could interpret even the honest policy errors of a rate-setting Chancellor as being in fact politically motivated, by a desire to stoke up booms. This would raise inflation expectations and hence nominal interest rates. Independence removes this interpretation and hence allows rates to be lower: this, or something like it, was the argument upon which independence was founded in the 90s.

There is, though, another reason for independence. If Chancellors set interest rates the media, in its imbecile failure to see that "errors" are inevitable, would blame them for even honest and unavoidable "mistakes": imagine how much worse the criticism would be of Gordon Brown if he had been responsible for interest rates in the mid-00s. The political case for central bank independence is to ensure that somebody else is the fall guy for inevitable policy "errors".

* The fact that one or two people foresaw the crisis of 2008 doesn't refute my point. Successful monetary policy requires not that forecasts be right sometimes, but that they be right all the time. AFAIK, nobody has achieved this, even roughly.

** I mean operational independence: Richard is right that its independence is circumscribed.

When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.

What he's getting at is that companies have organizational capital - cultures and ways of doing things - which are very difficult to change. The same might be true of political parties. It is rare for big established ones to collapse, Pasok and the Canadian Liberal party being notable exceptions: the thing about the Strange Death of Liberal England is that it was strange. And it is rare for them to be utterly changed: as Archie Brown points out in The Myth of the Strong Leader, transformative leaders are rare, and require especial circumstances. Those who complain about Blair moving to the right understate his orthodox social democratic achievements in, for example, reducing pensioner poverty and NHS waiting times.

In fact, Buffett is echoing something Marxists have long pointed out, that Labour is fundamentally a social democratic party which has only limited ability to change capitalism: Mr McDonnell's aspiration to transform it might be over-optimistic. One thing Miliband and Poulantzas agreed upon in their famous debate was that there are big constraints upon what parliamentary parties can do. As Miliband wrote:

Social-democrats have tended to be blind to the severity of the struggle which major advances in the transformation of the social order in progressive directions must entail. (Socialism for a Sceptical Age, p163-4)

Let's take just two of these constraints.

One is the danger of capital flight. Any government which tries to raise anything like £120bn from companies - some estimates of the "tax gap" - would see investment collapse; £120bn is equivalent to 30% of UK corporate profits. This greatly limits how much Corbyn can tax firms: in fairness to him, Richard Murphy recognises this.

A second constraint is ideology. Capitalism generates attitudes - cognitive biases - which serve to support the system: the media might exacerbate this process, but is not the sole cause of it. Corbyn will to some extent have to accommodate himself to this fact - and if he doesn't, his successor will. In fact, given his leftist credentials, Corbyn might be better able to do this: only a hardline anti-communist such as Nixon could have opened diplomatic relations with China during the cold war.

In this context, perhaps Yanis Varoufakis has something to offer Corbyn. He, more than most, knows just how difficult the left's job is.

I suspect, therefore that Labour will eventually revert to type, being a moderate successful social democratic party - though the journey will be, ahem, interesting. This offers both hope to the "Blairites" (a word which should be out-of-date by now) and caution to the Corbynites.

That, though, is just a suspicion, tempered by my deep antipathy towards forecasting. What I'm more confident of is that our political debate would be much improved if both sides were to question the ideology of leadershipitis and instead ask: just how much, and through what mechanisms, leaders can change parties? "Cargo cult" thinking is not good enough.